David Rubenstein, co-founder and chief executive of the
Carlyle Group, predicts that President Trump will not be able
to get tax legislation passed in the near term owing to a lack
of full Senate support and the unlikeliness that lawmakers will
be able to resort to a standard procedure for passing
contentious legislation.

The thing most of us have thought about is tax
legislation. All of us have been focused on that for quite some
time. I dont think its going to happen any time
soon, said Rubenstein, speaking at the SkyBridge
Alternatives Conference in Las Vegas.

Rubenstein said tax legislation is unlikely to be passed in
the Senate due to a potential filibuster from the
Democrats.

Theres no way to pass tax legislation in the
Senate with Republican votes only. The only way you can do it
is through budget reconciliation, he said, explaining
that this is how the Affordable Care Act, known as Obamacare,
was passed. Budget reconciliation bills are not subject to
filibuster.

But Rubeinstein says even this is unlikely, because he
doesnt see Congress agreeing to a fiscal year 2018 budget
in the near future.

We havent had a real budget agreement of any
consequence for some time  if you have no budget for
FY18, you have nothing to attach a budget reconciliation bill
to, he said. And even if a budget is passed, and tax
reform gets attached to that, there isnt enough revenue
to pay for it, Rubenstein argued. All the various options being
discussed  a border adjustment tax, charging income tax
on health insurance benefits offered by private employers, or
removing the mortgage-interest deduction  are politically
very unpopular.

That leaves dynamic scoring, according to Rubenstein, which
includes estimates for how much the legislation will boost
economic activity.

If there is a tax bill of any consequence, itll
have to rely on dynamic scoring and the assumption that you are
going to increase economic activity, he said.

Passing tax reform has been one of the stated early goals of
the Trump administration, along with repealing the Affordable
Care Act. After a vote on an early version of a new health care
bill was scrapped, Republicans in the house passed a measure
earlier this month repealing and replacing the signature
legislative achievement of the Obama Administration. But that
bill, the American Health Care Act, faces an uphill battle in
the Senate.

As part of his campaign rhetoric, President Trump came down
hard against the so-called carried interest loophole that
allows some private investment fund managers to treat gains on
their investments as income tax, rather than capital gains.
Rubenstein has lobbied hard against removing the carried
interest benefit, which benefits private equity managers and
some hedge funds.

Rubenstein didnt bring up carried interest in his
talk, but he tackled the broader issue of income
inequality.

All of us here, if you can afford to come to this
conference and afford to come to Las Vegas, you are in the
one-tenth of the 1 percent, he said. Income
inequality in U.S. is growing; income inequality is growing
around the world. Eight percent of the people in the world own
85 percent of the assets. Rubenstein, who has become
increasingly active in philanthropy in recent years, said he
feels the problem of decreasing social mobility is a
bigger problem than income inequality and repeated calls
he has made in past SALT speeches urging attendees to engage in
philanthropy.

He delved briefly into the environment for active investment
management, pointing out that private equity managers have $1.4
trillion in dry powder and more money flowing into these funds
all the time. Despite headwinds facing active managers, the
increased turmoil around the world should benefit alternative
investment managers, he said.

Our industry is flush with a fair amount of
cash, said Rubenstein. The hedge fund industry is
going to have more money coming into it than ever before. I
wont say its a golden age for the alternative
investment industry, but the alternative industry is likely to
be benefiting from a lot of the concerns around the
world.

As for the news that a special prosecutor, Robert Mueller,
had been appointed to investigate Trumps ties to Russia,
Rubenstein  a consummate Washington insider  said
that in his experience, the investigation will not wrap up
tidily any time soon.

This will go on between six and 12 months, based on
history, he said. Dont expect breaking news
every second on whats going to happen. There will be lots
of news stories, but nothing dramatic will happen for quite
some time.